Research On The Exception For The Preferential Transfer Avoidance

Similar to the legislation of the almost countries’ bankruptcy law, China adopted the "People’s Republic of China on Enterprise Bankruptcy Law" in2006which stipulates the bankruptcy revocation rights. In fact, the bankruptcy revocation rights provides retrospective adjustment mechanism for debtor’s completed conduct, which is specifically set up for the fair safeguarding the interests of creditors and to some extent to impacting security of the transaction at the expense of proprietary systems. Conflict between two values in the design and application of specific rules in the bankruptcy revocation rights fully manifested. For example, in order to protect all creditors managers tend to extend the right of revocation. Based on maintaining existing benefits, the relative will invoke a variety of reasons to defend managers’ bankruptcy revocation rights. In bankruptcy practice, there are lots of disputes on whether a particular act constitutes the right to revoke. July2013, the Supreme Court issued "on the applicable requirements<People’s Republic of China on Enterprise Bankruptcy Law> Issues (two)" explained the applicable rules of the bankruptcy revocation rights, which provides a good guideline for the limitations and exceptions to the rules applicable to the practice. But in practice the situation is quite complicated, further study of exception to the preferential transfer avoidance is still very necessary.In the common business activities, the acts of the creditor and debtor are likely to be for the normal operation of the enterprise or out of subjective good intentions. Should all these acts be revoked without discerning, the interest of the "innocent" creditors would be negatively influenced. What’s more, it would become very difficult to eliminate the misgivings of the creditor that their dealings could be revoked. Consequently, the normal business efficiency and business securities will be violated.Therefore, the author suggests to make exemptible restraints on the revocable subjects with consideration for the interest of those party who made allowable business, when establishing the system of the revoking rights in Bankruptcy Law in China to avoid the abuse of such rights. The exemptible restraints would be devised as: the relevant acts should be firstly presumed to be revocable; then enact the deraignment for the party:if it can prove that the act is allowable and could objectively make the debtor enterprise obtain sufficient counter-consideration, the act ought to be exemptible; further more, enact a deraignment criteria for subjective good intentions. The party is conjectured to have the viciousness, but it grant the beneficial creditor the right to offer evidences to prove its good intentions, for the sake of avoiding the revoking rights.The objective or subjective restraints would eliminate the anxiety of the actor and make it adjust its business act through the leading function of the legislation, consequently ensured the securities of the normal business before the insolvency procedure.